Market Update

General - Evolution - Oz Minerals - Sheffield - Venturex - Dacian - Lucapa


Good afternoon

German Industrial Output rose by 2.6% last month, the highest number in 6 years....Europe continues to do VERY well, and I think we can be assured, that interest rates will start rising in 2018....

Not much happening in currencies so far today, while base metals are stronger except for lead, where the market is taking some more profits. 

Gold had a big reversal on Friday, testing 1260US$ on the downside, before closing at 1273 or so - and it continues higher today. In A$ terms, it´s doing very well at 1652 A$ currently. The A$ probably has topped, the US$ gold price probably has bottomed - potentially a nice cocktail for Australian stocks. Which brings me to good old 

 Evolution -  one for value players - the stock has been a bit boring - but that´s what it is meant to be! Jake wants to make money for shareholders across the cycle, refraining from continued "adjustments" of the gold price for reserve-calculations, and from non-value adding aquisitions. The stock has been trending down recently in line with the gold price....I think this might come to an end now. A strong copper price, and a better A$-gold price should create some interest again. At 2.24 A$, EVN are close to the bottom of this years trading range as well, and I think could bounce quite nicely.

Another stock of excellent quality,

OZ Minerals - should also profit from the same : Stronger copper price, lower A$! The share price has reacted to a recent overshooting quite nicely, and is down from 9$ to the current 7.80 A$. While Antofagasta for example are back close to their recent high, I think OZL offer some very reasonable tarding potential. The company has started to build Carapateena, which will come into production in the 4th Quarter 2019, and is continuing to generate very nice cash from Prominat Hill, which produces about 110.000z of copper at approx 1.25 $/lb AISC. Even dureing construction of Carapateena, OZL will always maintain a healthy cash position, leaving room for another development, while paying a quite healthy dividend of 20-30ct/share . Potentially, the next project could be West Musgrave, a copper and nickel project, for which we should see a scoping study soon. 

Sheffield - the Enviromental Protection Authority today recommended the approval of their mineral sands project, subject now only to a 2 week hearing period. The project has had very strong, local support so far, and as one can see in today´s move, the market takes it as done. Now some more off-take, and funding will need to eb done. I believe, that the company is fairly advanced on both these issues. SFX have strong corporate appeal - otherwise I believe, that investors would now rather see a subdued period of construction ahead. In the emdium term, this is one of very few new mineral sand producers, and valuations are still substantially above 1$ for the company. 

Venturex Resources - strong move today on drilling results from their Sulphur Springs copper project: 38m with 3.5% from about 100m are excellent numbers, and two more holes have intersected similar rock - assays are pending. This has been a copper/zinc project in the making for a long time, always just short of being strong enough to get the go-ahead. Significant results like this one could be a game-changer for them. Worth watching!

Dacian Gold - underground development at their future Beresford Mine is 4 weeks ahead of schedule and has intersected first ore now. Construction of the project is on time and budget for a start-up in March 2018. The usually very boring time, when mines are being built, is slowly but surely coming to it´s end now. Obviously, the stock is cum commissioning risk...but so far, there is no reason to expect any issues. DCN are fully financed to production as well. This is one I am watching very carefully, also, as exploration has the potential to add some spice in the meantime. This will be a sizeable project, planned to produce more than 200.000 oz per annum, and one larger companies could well be interested in.

Lucapa Diamonds - announced a financing for their second diamond mine, Mothae in Lesotho. Sounds like a quite good project - but the financing does not come cheap: 13% on 15 mill US$, and the last two instalments , totalling 3.75 Mill US$, can be converted to equity at the lowest one-day VWAP in the 15 days prior to conversion. Unfortunately, the company has a history of diluting it´s capital...and 13% is a fairly hefty coupon as well. Again, I am watching this one...exploration in Angola, and construction progress in Lesotho could be positive triggers here, as well as finding very large stones in Angola.

I will be in London for two days, and after that, in Australia for 2 weeks - you will hear very little from me!

Have a nice evening!


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